The Key Factors Leading to the Success of MVNOs

Source Wired

It’s true that timing is everything, and the mobile telecommunication industry is no exception. One of the more recent and popular terms within the wireless community is Mobile Virtual Network Operator, also known as an MVNO. However, the average consumer isn’t quite sure what these MVNO services provide. So what exactly are these services? What is the difference between an MVNO and a traditional wireless company? Why is MVNO quickly becoming the leading topic of conversation within the mobile space in 2013? Depending on where you get your technology news fix, I’ve found that the answers to these questions can vary and result in a misconception about the business model surrounding MVNOs. In an attempt to clear up the confusion, let’s take a look at the strategies used by an MVNO and how its success is tied to where we are in the current market.

To start, let’s tackle the basics.

The MVNO Difference
Think of an MVNO as you would any common good that is bought from a distributor or vendor at a wholesale/bulk price, and then sold to consumers at a retail price. Retail prices are higher because they factor in things like shelf space, merchandising and other mark-ups from the retail store. Wireless network operators such as AT&T, Sprint, T-Mobile and Verizon Wireless sell to consumers at a more retail price, where an MVNO acts as a subsidiary to these network operators and has access to services at wholesale rates. The services are then resold with independent pricing plans. Basically, consumers are able to access the same exact network towers as you would with a traditional wireless company. The benefit to the network operators is that MVNOs traditionally target a different demographic as well as access untapped capacity on their network. As a result, they see growth to their overall subscriber numbers.

MVNOs have been around for 10 plus years, however only a few have survived. For example, Disney’s Mobile ESPN had the name and recognition, but it wasn’t able to break through. While failure was attributed to targeting demographics that were too market specific, the only thing the first generation MVNO can be questioned with is being ahead of its time. Now, with the support of social sharing, a change in consumer purchasing habits, access to smartphones at lower costs and the downturn in the economy, there are more incentives for consumers to use and share a discounted mobile phone service.

2013: The Year of the MVNO
With the high volume of low-cost phones now available to the public, there is an increase in the number of consumers who are able to purchase and sustain a monthly mobile phone bill. Now, they are looking for options as traditional carriers continue to change their data offerings and add hidden fees to their wireless bills. An example of this is Verizon Wireless’ recent move to place a cap on their unlimited data plans for new contracts. With a more predictable monthly bill and on-average lower costs, families across the country are switching from traditional wireless carriers to MVNOs.

Most MVNO’s are seen as “me too” companies. They are piggybacking on a traditional wireless company’s network and then advertising in the same channels to try and get their message out. Most look for their niche – which is often times the youth, international focus or even per minute rate plans. However, they are all advertising against the traditional wireless carrier to try and get their message heard.

The emergence of social media is a leading factor in the rise of the MVNO. MVNOs benefit from the “shareability” that online social platforms provide. By creating a socially-driven marketing campaign via Facebook, Twitter and YouTube, operators can engage with consumers and encourage them to share the MVNO services.

Breaking Through
Instead of trying to be the loudest voice and compete against companies spending billions of dollars to make sure they are heard, MVNOs have the opportunity to reinvest those dollars back into the members of the company. By relying on members to spread the word, MVNOs are able to directly compensate them for telling their friends and family about the service.

This referral strategy removes the need for retail chain stores and the billions of dollars spent on advertising to gain market share. Consumers become the voice of the company and they are economically rewarded with monthly recurring income by simply sharing a great mobile service organically via their social connections. In fact, we’re already socially referring services and recommendations to each other every day. A recent study showed 93 percent of consumers have purchased a product or service based on a friend’s recommendation. Why trust the stranger in one of the traditional wireless carriers advertisement when your trusted neighbor is endorsing a product in real-time?

Not all MVNOs are created equal, so be sure to weigh your options and pick the plan that is right for you. Be sure to look at factors like Roaming fees, data throttle limits, enrollment fees, device restrictions and whether or not you are able to subsidize the cost of your plan by referring others. Regardless of the service you choose, MVNOs are helping put the spending power back into the hands of consumers.

source link via The Key Factors Leading to the Success of MVNOs

Ryan Wuerch is the founder and CEO of Solavei, a social commerce company offering recurring monthly income by sharing an affordable, contract-free mobile service with friends and family. You can follow him @rwuerch.

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